Public SaaS has Net Retention of 100%+

05/31/2017By Sammy Abdullah, CFA

One SaaS metric VC pay close attention to is net retention. It tells you what percent of revenue you retained from the prior year, after accounting for upgrades, downgrades, and churn. Formulaically it’s beginning of period revenue + upgrades – downgrades – churn. If that formula yields a number greater than beginning of period revenue, then you’ve got net retention in excess of 100%. It’s where you want to be because it means the growth from your existing customer base more than offsets any losses from that customer base.

On the flip side, net retention below 100% means churn and downgrades were greater than any growth you enjoyed from the expansion of existing customers. If that’s the case, you need to take action with Customer Success and Customer Support to try and reverse the trend (generally we find it’s not a product issue, but rather an issue of not contacting/supporting customers often enough).

So what’s a good level of net retention? The data below shows the net retention of 20 publicly traded SaaS companies since 2013. As you can see, the trend is stable: median net retention in 2016 was 99% and the average was 105%. These figures haven’t deviated much from past median and averages. That said, the top 5 companies had net retention averaging 121% and the top 10 are at 112%. So to answer our question at the beginning of the paragraph, as the data show net retention of 99% is average, 112% is good/better than average, and 121% is exemplary.

2013

2014

2015

2016

Name

Ticker

Retention

Retention

Retention

Retention

Marketo, Inc.

MKTO

100%

109%

105%

acquired

Cvent, Inc.

CVT

---

100%

100%

acquired

Demandware, Inc.

DWRE

100%

100%

100%

acquired

Veeva Systems Inc.

VEEV

---

138%

125%

127%

New Relic, Inc.

NEWR

---

110%

130%

125%

2U

TWOU

144%

112%

120%

123%

Blackline

BL

---

118%

120%

116%

Box, Inc.

BOX

144%

126%

117%

115%

Zendesk, Inc.

ZEN

---

---

123%

115%

Instructure

INST

100%

100%

100%

100%

Five9, Inc.

FIVN

100%

96%

96%

100%

Xactly

XTLY

---

104%

105%

99%

RingCentral, Inc.

RNG

---

99%

99%

99%

HubSpot, Inc.

HUBS

83%

93%

99%

99%

SecureWorks

SCWX

99%

96%

108%

98%

Apptio

APTI

---

---

100%

98%

Cornerstone OnDemand, Inc.

CSOD

95%

94%

95%

95%

Benefitfocus, Inc.

BNFT

95%

95%

95%

95%

Castlight Health, Inc.

CSLT

---

103%

116%

94%

Proofpoint, Inc.

PFPT

90%

90%

90%

90%

MEDIAN

100%

100%

103%

99%

AVERAGE

105%

105%

107%

105%

As a founder, net retention should be as important to you as new bookings growth as it’s an indication of the health of the customer base, product-market fit, and the stickiness of the product. Strive to get at least above 100% so you’re keeping the customers you have, but if you can achieve 112%+, your customer base will be a significant source of annual growth.